Shareholders in Santos and Woodside Energy could get a bigger bang for their buck from an "end-game strategy" and not more gas, independent analysis suggests.
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Falling sales, an LNG "glut" and fierce price warfare face Australian producers that choose to retain and expand operations, according to a think tank.
The economic modelling released on Tuesday by the independent Institute for Energy Economics and Financial Analysis found there were two available strategies.
One way to reward mum and dad shareholders and institutional investors would be a "divest quickly" strategy, which BHP did in 2022 when it offloaded its petroleum division to Woodside.
The other option was to "harvest", which means cutting costs and investment to maximise cash flow before selling or liquidating a business.
"Australian LNG producers are facing a very different market to what they are used to, with declining demand from our largest buyers and fierce competition for the uncertain demand in replacement markets," the institute's CEO Amandine Denis-Ryan said.
"They will need to adjust their strategy quickly if they want to succeed in this environment, and shift their focus from growth to cost reduction," she said.
Bosses must also change their thinking, and get new scorecards that are not based on production growth, or be replaced to better manage the transition, the report recommended.
"Australian LNG producers are among the highest-cost producers globally, and will likely face challenges in this environment," according to the analysis.
The Santos board faces scrutiny at its annual general meeting in Adelaide on Thursday over growth plans and a stagnating share price.
Critics have urged Santos to walk away from the controversial Narrabri coal seam gas project in NSW, and the Barossa offshore gas joint venture north of Darwin that has been delayed by court battles with Tiwi Islanders.
But Santos has confirmed its "confidence" in the company's strategy to deliver value to shareholders through production, decarbonising operations and developing low-carbon fuels.
Woodside's chair Richard Goyder, meanwhile, faces a battle for re-election at the AGM in Perth on April 24 as some call for new leadership.
Separately, shareholder activist organisation Market Forces said major investors were failing to take action in line with promises under an initiative known as the Climate Action 100+.
The charter for so-called active ownership calls for solidarity on AGM resolutions and votes, such as moves against Ian Macfarlane at Woodside as well as Susan Avery and Joseph Hooley at ExxonMobil.
Directors of companies still expanding fossil fuel production must face a credible threat they will be voted off boards, Market Forces CEO Will van de Pol said.
But there has been no downward trend in support for fossil fuel company directors, who continued to be elected with almost 97 per cent support on average, the analysis found.
"It's very concerning that the world's biggest investment firms are failing to live up to their 'active ownership' claims when it comes to managing immense climate-related financial risks," Mr van de Pol said.
He said it was one of the most important tools at their disposal to mitigate risk by bringing coal, oil and gas companies into line with climate goals.
Companies are also choosing to divest in response to climate risks. For example, Origin Energy sold off its interests in the Beetaloo Basin in 2022, saying it had a "strategy and ambition to lead the energy transition".
Australian Associated Press
